a. On average over the past 50 years real GDP has grown about 3% per year. b. Recessions occur at regular intervals.c. Both of the above are correct.d. None of the above is correct.ANSWER: a. On average over the past 50 years real GDP has grown about 3% per year.TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y 3

In the aggregate demand and aggregate supply model the price level is on thea. horizontal axis and quantity of output is on the vertical axis.b. vertical axis and quantity of output is on the horizontal axis. c. horizontal axis and unemployment is on the vertical axis.d. vertical axis and unemployment is on horizontal axis. ANSWER: b. vertical axis and quantity of output is on the horizontal axis.TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y NOTE: THE FOLLOWING QUESTION IS REPEATED FROM THE ON­LINE QUIZZES. YOUR STUDENTS MAY HAVE ALREADY SEEN THIS QUESTION AND ITS ANSWER.7

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A fall in prices makes consumers feel more wealthy. As a resulta. aggregate demand shifts to the left.b. aggregate demand shifts to the right.c. there is a movement up a given aggregate demand curve.d. there is a movement down a given aggregate demand curve.ANSWER: d. there is a movement down a given aggregate demand curve.TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y 8

Other things the same, which of the following happens when the price level falls?a. Households try to increase money holdings.b. The real exchange rate appreciates. c. U.S. net exports increase. d. All of the above are correct.ANSWER: c. U.S. net exports increase.TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 3 RANDOM: Y 11

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Which of the following tends to increase the quantity of output demanded when the price level decreases? a. the wealth effect b. the interest rate effect c. the exchange rate effectd. All of the above are correct.ANSWER: d. All of the above are correct.TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 3 RANDOM: Y

If people decide to save more for retirement a. or the government raises taxes, aggregate demand will shift right. b. or the government raises taxes, aggregate demand will shift left. c. aggregate demand will shift right. If the government raises taxes, aggregate demand will shift left. d. aggregate demand will shift left. If the government raises taxes, aggregate demand will shift right. ANSWER: b. or the government raises taxes, aggregate demand will shift left.TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 3 RANDOM: Y 13

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Which of the following do we expect in the short run if the money supply increases? a. The interest rate rises. b. Investment falls. c. The price level rises. d. All of the above are correct.ANSWER: c. The price level rises.TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 3 RANDOM: Y NOTE: THE FOLLOWING QUESTION IS REPEATED FROM THE ON­LINE QUIZZES. YOUR STUDENTS MAY HAVE ALREADY SEEN THIS QUESTION AND ITS ANSWER.14

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Suppose there is a broad increase in the price of stocks which causes an increase in the real wealth of individuals. Consumption spending rises in response to the increase in wealth. This will cause thea. aggregate demand curve to shift to the left.b. rate of unemployment to decrease.c. general price level to fall.d. aggregate supply curve to shift to the right.ANSWER: b. rate of unemployment to decrease.TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 3 RANDOM: Y 15

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Which of the following shifts the long­run aggregate supply curve to the left? a. an increase in the economy’s capital stockb. an increase in the availability of natural resources from abroad c. stricter environmental regulations d. None of the above is correct. ANSWER: c. stricter environmental regulationsTYPE: M KEY1: D SECTION: 4 OBJECTIVE: 3 RANDOM: Y 16

According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply a. increases the price level and real GDP.b. increases the price level, but does not change real GDP.c. increases real GDP, but does not change the price level.d. decreases real GDP, but does not change the price level.ANSWER: b. increases the price level, but does not change real GDP. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 3 RANDOM: Y 18

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If the price level is less than expected, producers believe their relative price hasa. increased and so increase production. b. increased and so decrease production.c. decreased and so increase production. d. decreased and so decrease production. ANSWER: d. decreased and so decrease production.TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 3 RANDOM: Y 19

An increase in the expected price level shifts aggregatea. demand to the right.b. demand to the left.c. supply to the right.d. supply to the left.ANSWER: d. supply to the left.TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 3 RANDOM: Y NOTE: THE FOLLOWING QUESTION IS REPEATED FROM THE ON­LINE QUIZZES. YOUR STUDENTS MAY HAVE ALREADY SEEN THIS QUESTION AND ITS ANSWER.21

During the 1930sa. and the 1940s U.S. aggregate demand appears to have shifted far to the left.b. and the 1940s U.S. aggregate demand appears to have shifted far to the right.c. U.S. aggregate demand appears to have shifted far to the right. During the 1940s aggregate demand appears to have shifted far to the left.d. U.S. aggregate demand appears to have shifted far to the left. During the 1940s aggregate demand appears to have shifted far to the right.ANSWER: d. U.S. aggregate demand appears to have shifted far to the left. During the 1940s aggregate demand appears to have shifted far to the right.TYPE: M KEY1: D SECTION: 5 OBJECTIVE: 4 RANDOM: Y 24

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Which of the following is associated primarily with aggregate supply shifting far to the left?a. the Great Depressionb. the economic boom of the 1940sc. stagflation of the 1970sd. None of the above is correct.ANSWER: c. stagflation of the 1970sTYPE: M KEY1: D SECTION: 5 OBJECTIVE: 4 RANDOM: Y 25

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If the economy is experiencing stagflation and the Fed increases the money supply in the short run outputa. increases, in the long run the price level increases.b. increases, in the long run the price level decreases.c. decreases, in the long run the price level increases.d. decreases, in the long run the price level decreases.ANSWER: a. increases, in the long run the price level increases.TYPE: M KEY1: D SECTION: 5 OBJECTIVE: 4 RANDOM: Y